Prices paid by U.S. manufacturers jumped to their highest level since June 2022, according to the Institute for Supply Management’s latest Purchasing Managers’ Index report. The surge comes as companies navigate a mix of tariff-driven pressure, inflationary costs and heightened energy uncertainty linked to the escalating Middle East situation.
Even with costs climbing, manufacturing activity continued to expand for a second straight month. ISM’s PMI registered at 52.4% in February, down 0.2 percentage points from January. (A PMI below 50% generally signals contraction.)
On the demand side, three of ISM’s four key indicators—new orders, backlog of orders and new export orders—have been expanding since the start of 2026. New orders grew across U.S. manufacturing in February, especially in four of the “big six” sectors: computer and electronic products, chemical products, machinery and transportation equipment.
At the same time, customers’ inventories remained “too low,” according to the report—a condition that often triggers additional ordering and supports growth. Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said on Monday that this dynamic is likely what helped drive February’s results.
Sentiment among surveyed executives has also improved. Spence reported a roughly two-to-one ratio of positive comments to negative comments, matching January and viewed as encouraging after months of tariff-related volatility.
Hiring sentiment moved in a more constructive direction as well. Comments around hiring versus headcount reductions improved to a 1-to-1.4 ratio—the best since May 2025. Tariffs are still frequently cited as a reason companies are leaving roles unfilled, but Spence said the trend is more positive than in recent months.
The biggest alarm in the report was ISM’s prices index, which came in at 70.5% in February—up 11.5 percentage points from the prior month. Key drivers included higher steel and aluminum costs, along with tariffs that are affecting the entire value chain.
Spence said she was encouraged overall, while noting that the Supreme Court’s ruling—issued after ISM collected February survey data—could add uncertainty depending on how the administration seeks to replace the negated IEEPA tariffs through other authorities.
